Investor News

Magyar Telekom third quarter 2018 results

Budapest,November 7, 201818:00

Magyar Telekom (Reuters: MTEL.BU and
Bloomberg: MTELEKOM HB), the leading Hungarian telecommunications service
provider, today reported its consolidated financial results for the third quarter and
first nine months of 2018, in accordance with International Financial Reporting
Standards (IFRS).

“I am delighted
that we have maintained our strong performance from the first half of the year
in the third quarter of 2018. Once again, we delivered growth across all
business lines, with System Integration and IT and Equipment sales revenues
contributing strongly to the 5.4% revenue growth achieved in the quarter.

In Hungary, the
demand for mobile data continued to grow, in line with the increasing number of
smart devices in the market. The latter was reinforced by our strategy for
equipment sales, which included a new subsidy structure favoring smart handsets
in the product mix. Our new mobile packages drive pre- to postpaid migration
among our customers and further support our mobile data revenue growth. These
factors were also shown in our mobile ARPU, where we achieved 8% growth
year-on-year.

As per our
ongoing strategy, we maintained a strong focus on our fixed network. We are
working to achieve our goal of extending our fiber coverage to an additional
300,000 households in 2018. This effort is part of our overall long-term plan
to offer gigabit internet connectivity across the whole country. The benefits
of these efforts materialize in the ongoing growth of our broadband retail and
TV revenue lines. In addition, equipment revenues continued to grow
year-on-year, reflecting our successful efforts to meet customer needs, by
allowing customers to purchase mobile devices with their fixed contracts and
vice versa.

Next to offering
an outstanding fixed network to our customers, the other pillar of our growth
strategy is our FMC offering. Currently we are still the only truly integrated
player in the Hungarian market with an integrated fixed-mobile offering to our
customers. During the third quarter we updated our Magenta1 proposition to present
a clearer structure and more convincing offer to customers. While in the second
quarter we doubled the mobile data allowance, in the third quarter we unified
our offering, giving our Magenta1 customers the ability to achieve a 30%
discount on all related services. Thanks to the changes introduced in our
Magenta1 offering in 2018, over one-fifth of our households are now Magenta1
subscribers. In addition to our consumer focus, we relaunched Magenta1 Business
in the third quarter, offering business customers similar advantages, including
possible IT related services.

In the System
Integration and IT segment we had a strong quarter, reaching 19.8% revenue
growth year-on-year. The growth was again attributable to a high volume of
software and hardware projects with a lower profit margin. These projects, with
a lower than average margin, serve to establish relationships with several
different institutions – ones we can later convert to higher margin service
contracts.Group
performance during the quarter was further supported by the continued
turnaround in Macedonia. Both revenues and EBITDA improved thanks to solid
performance across all business lines, a positive trend in service revenues, as
well as favorable exchange rate movements. “

Public guidance

*excluding Crnogorski Telekom financials and the transaction price of the disposal of the majority ownership**including IFRS 9 & 15 imapcts

This investor news contains
forward-looking statements. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.
These statements are based on current plans, estimates and projections, and
therefore should not have undue reliance placed upon them. Forward-looking
statements speak only as of the date they are made, and we undertake no
obligation to update publicly any of them in light of new information or future
events.

Forward-looking statements
involve inherent risks and uncertainties. We caution you that a number of
important factors could cause actual results to differ materially from those
contained in any forward-looking statement. Such factors are described in,
among other things, our annual financial statements for the year ended December
31, 2017, available on our website at
https://www.telekom.hu which have been prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”) and adopted by the
European Union.

In addition to figures
prepared in accordance with IFRS, Magyar Telekom also presents non-GAAP
financial performance measures, including, among others, EBITDA, EBITDA margin
and net debt. These non-GAAP measures should be considered in addition to, but
not as a substitute for, the information prepared in accordance with IFRS.
Non-GAAP financial performance measures are not subject to IFRS or any other
generally accepted accounting principles. Other companies may define these
terms in different ways. For further information relevant to the interpretation
of these terms, please refer to the chapter “Reconciliation of pro forma
figures”, which is posted on Magyar Telekom’s Investor Relations webpage at
www.telekom.hu/investor_relations.